Stockton weighs power play

Thursday

Feb 28, 2008 at 12:01 AM

STOCKTON - City Hall is considering a bid to involve itself in Stockton's electricity market, a measure Mayor Ed Chavez said could cut rates and generate revenue but that is likely to require a monumental fight with Pacific Gas and Electric Co., the city's century-old power provider.

David Siders

STOCKTON - City Hall is considering a bid to involve itself in Stockton's electricity market, a measure Mayor Ed Chavez said could cut rates and generate revenue but that is likely to require a monumental fight with Pacific Gas and Electric Co., the city's century-old power provider.

Chavez declined Wednesday to provide more than an outline of the city's intent - he said he will detail it today in his State of the City address - though his references to "local control" and "municipal-run utilities" suggest Stockton officials are at least considering a bid to oust PG&E.

His statement followed months of internal preparation at City Hall for what is almost certain to be a showdown with PG&E over its infrastructure and the right to serve about 103,000 local customers.

"We maintain that our system is not for sale," PG&E spokesman Jeff Smith said. He said a takeover would be "unduly expensive and a poor use of local funds."

Chavez said private talks about the matter among senior officials at City Hall - and the production of a "preliminary analysis" - amount only to "sticking our toe in the water, kicking the tires." He said he likely will call today for a formal study of the issue, which he said could be finished by December, his last month in office.

Dozens of public agencies across the state operate their own utilities. In Lodi, rates under municipal control were once among the highest in the nation, though they have since compared more favorably.

The average retail price of electricity per kilowatt-hour in California in 2005 - the last year for which data were available - was 11.74 cents, according to the California Energy Commission. PG&E's average price was 12.68 cents. The city of Lodi's was 11.8 cents, according to a commission report.

Chavez and senior city staffers began privately discussing the involvement of Stockton in the city's electricity market in 2006. At the time, the city was at least serious enough that it retained a San Francisco attorney to study the issue.

In a letter to the city that year, Howard Golub, who once worked for PG&E and who assisted the Port of Stockton in its formation of a utility in 2003, outlined various options the city could pursue. Then-Vice Mayor Gary Giovanetti said at the time that the letter, which the city declined to make public, outlined a range of options, from building a power plant to negotiating for power.

Chavez said Wednesday that one option being considered now could involve the port, though he declined to discuss that in detail.

PG&E has spent heavily to maintain its turf. In 2006, the company spent millions of dollars fighting a bid by the Sacramento Municipal Utility District to expand into Yolo County. PG&E claimed in its campaign that the expansion was fraught with risk, and voters rejected the measure.

In San Joaquin County, PG&E is opposing a bid by the South San Joaquin Irrigation District to take over PG&E assets and to provide service in Escalon, Manteca and Ripon.

Chavez said Wednesday that he believes the city has the authority to enter the electricity market, though he declined to detail the city's legal position.

PG&E's Smith said, "If they were to try and take our, essentially our property through eminent domain, it would result in a lengthy and costly lawsuit."

The City Council in 1954 signed a franchise agreement with PG&E - allowing PG&E to erect power and light poles, among other infrastructure - that set no expiration date. The deal replaced a 49-year agreement that was to expire in 1958. The agreement called for PG&E to pay the city a portion of annual receipts from the sale of electricity in the city, about $1.1 million in the past budget year.

According to the Stockton Municipal Code, the city is entitled to purchase PG&E's property at a price set by the state's Public Utilities Commission. However, the code also includes a provision that the franchise agreement would expire only if voluntarily surrendered by PG&E, or if some other agency purchased it by voluntary agreement with PG&E or condemned PG&E's property and took it through eminent domain.

Golub did not return a telephone call Wednesday. City Manager Gordon Palmer declined to comment. So did City Attorney Ren Nosky and Economic Development Director Steve Carrigan.

Chavez's speech today comes just two days before the city on Saturday retakes control of its water and sewer utilities, the operation of which was privatized in 2003 in a deal the City Council abandoned last year.

Internal discussions about the city's interest in the electricity market have been closely guarded. Those council members who said they knew of the city's interest had only a general understanding of it.

Councilman Clem Lee said he is "cautiously optimistic" about the city's involvement in electricity. He said the details of the measure are as yet uncertain, but that the idea is promising.

"If we can improve service and lower rates, and particularly, I'm thinking, for folks who might need it the most, that is hugely positive stuff," he said.

City observers reacted similarly.

Dale Stocking, a member of the Concerned Citizens Coalition of Stockton - the group that sued the city to undo the privatization of its water and sewer utilities' operation - said Stockton would be wise to consider forming an electric utility. It likely could save money and manage the utility well, he said.

The Greater Stockton Chamber of Commerce's Douglass Wilhoit said it is prudent for the city to consider ways to save ratepayers money.

Chavez said the city's involvement in the electricity market could save residents money, but that lower rates could also lure businesses to Stockton.

PG&E's Smith said the company is the "best available option in terms of providing safe and reliable electric service."

Chavez has a record of announcing major initiatives in State of the City addresses.

In 2006, he announced his Strong Neighborhoods Initiative, a $116 million public borrowing campaign to pay for parks, civic centers, roads, housing and other infrastructure. The plan, subsequently adopted by the council, has more than any other program come to define Chavez's tenure as mayor. He said in December that he would not seek a second term.

PG&E is one of a number of sponsors of the State of the City event. Like the other sponsors, it has a table reserved for it.

Record librarian Delailah Little contributed to this report.

Contact reporter David Siders at (209) 943-8580 or dsiders@recordnet.com.